1 2023 StealthGas Inc. Q Earnings Call
Yeah.
Good day, and thank you for standing by walking to the staff cost Q1, 2023 results conference call.
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I turn the conference over to your Speaker today, Mr. Hobbies Matthias. Please go ahead.
Good morning, everybody and welcome to our first quarter earnings call and webcast.
We're just talking about the skills so guests.
Discuss market the company I'm looking to replace Mr. Mr Stillwater, Scotland Investor relations to discuss the.
Commercial aspects.
Before we commence the personal luxury market, we will be discussing forward looking statements.
Reflect current views with respect to future events and financial performance.
At this stage if you go to take a moment to read our disclaimer on slide two of the presentation.
I started to disclose in the past.
Filing with Securities and Exchange Commission.
I would also like to point out that all amounts quoted unless otherwise clarified are stated in U S dollars.
Good day.
For the first quarter, the 20th industry reporting yet again, another quarter of strong profitability.
So let's proceed to discuss exactly results and update you on the Companys strategy and the market in general.
On slide three.
I wish somebody who some of these highlights.
The first quarter is usually a seasonally strong quarter for LPG trading shall we continue our strategy of fixing more ships on time charters at improved levels.
It's a reduction in spot market days by 38% of the fact that we had a single vessel dry dock increase their operational utilization of the fleet to 97, 3%.
We're showing increased interest from charterers and lodging bunker longer periods ever took advantage of COVID-19.
With us to help secure today, 80% of the remainder of 'twenty complete H contract adult.
You have locked in about 150 million in revenues for all subsequent periods.
In terms of our sale and purchase activity will continue to look for opportunities to sell some vessels.
Even the boosting market.
With our joint venture partners were sold to beat them, Gus kind of equate them to chew on that for a project of about 14 million in March.
Following that we are following that we recently entered into an agreement to sell four more vessels for a combined value of about $300 million.
We're really geared up to be reflected in over the next couple of quarters, depending on the deliveries will take place to bring your walnuts.
Looking briefly at our financial highlights for gas drilling is came in with a very strong 38 1 billion.
The $55 nine last year, a 6% increase despite having a much smaller fleet.
Thank them from operations after operational expenses came in at $9 7 billion.
Back to one 2 million last year, a 19% increase.
While our net income assisted by the return.
On the investment from our joint venture scheme in at 64, 9 million compared to $7 6 million last year, Boston double translate into an EPS of 44 cents for the quarter.
Gross profit scored the best perpetual private for a single quarter.
We continue to maintain a healthy balance sheet with ample liquidity of $92 6 million how.
How should we continue to pay down debt.
For like $10 that the board approved a day and $15 million share buyback program.
Graham, but there are going to implement going forward.
Joe to cut interest rates, our priority will be to pay down our debt.
For the share buyback program may be gradual we are confident that our cash flow will remain healthy for the rest of the year, that's giving us the confidence to be able to meet both via both targets.
On slide four for our for your own fleet deployment update as of May.
Last time, we announced eight new charters. This game, we announced nine charters and charter extensions at similar or better levels and are continuing to ship charters interested in locking in longer than usual.
I was recently entered in project another three.
Time charter, which is always a good sign for the market.
As such we encourage that contracted days to 80% for the remainder of 'twenty to 'twenty, three and have secured about $70 million in revenues and our total contracted revenues for all payers, having close to $115 million.
We have almost our entire fully owned fleet on time charters and only two vessels trading in the spot market.
Lastly out of three undersized vessels due for Drydock. This year, one was drydocking in the first quarter one was dry docked in April .
Back to the third one around the middle of June .
On slide five we are providing an update on the on our two JV comprising of five parcels and both of them.
Our first JV.
For smaller vessels.
We do not enter into any new time charters, mainly due to the fact that three of these vessels are three or four drivers of this year.
But if it got caught all of them are scheduled to begin imminently, we're in discussion for shopping with us.
H Drydock.
One of the two remaining dry docks for 2024.
I'll start with the hospital over the vessels operating in the spot market.
Most of them JC pardon me coal pricing.
Gas carrier in the water last one more under construction.
The first quarter of a JV there starting to disclose the other Mexican go Scott because you Don Yakov alternate for close to $40 million. This was a very profitable channel.
The profits were strong in the income statement for the quarter.
Following the story in April still gets received 19 point.
Cash and.
And distributions from the JV.
Douglas chartering the remaining vessels because they.
They're very profitable time charter for one year with charters option to extend the one more year.
Charter's option to buy the vessel instead, but if it doesn't get you exercise.
There's an option for the JV.
So back.
Back to the charterer all at very profitable levels.
Previously discussed with you we do not intend to find them compelling acquisition was that an equity.
Joseph has sufficient cash on hand earmarked purpose.
The discussions.
We finance jazz to provide that.
Okay.
In terms of our geography slide six our company focuses on regional trade and local distribution of gas. This graph is a snapshot of the positioning of the fleet, including the JV vessels as of May 24.
The distribution of all of our physical stores really changed since our last call Ultra continued to position of more than a couple of other states in Europe , what else are currently better than that.
Basketball player in Asia currently.
We have 16 ships trading west of Suez.
Particularly in northern Europe , nine vessels in the middle East far east slightly hasn't before.
For vessels in the U S and Caribbean and Alaska vessels in Africa.
No no.
Our financial performance.
Thank you Larry and good morning.
And to everyone.
I will discuss our financial performance for the first quarter of 2023.
Exactly.
What do we see the income statement for the first quarter against the same period.
'twenty two.
And that's revenues came in at 74.
For the quarter a considerable increase.
8% compared to last year.
In doing that.
Okay.
12% and total fleet days.
Operating expenses were 14.5.
Similar to the previous quarter number.
Operating expenses were elevated compared to last year. Despite the few of them.
And we expect them to come down in the next quarter, even though we.
They sell them in place.
Pictures.
With glucose.
In terms of Drydocking, we had the 1 million in the first quarter as an example.
One of the handy size vessels.
Got it.
Expenses for the.
Oh sure.
Hello.
Depreciation is another item that we saw a decrease of $6 6 million due to the decrease in the number of vessels.
Interest and finance costs increased to $6 million.
Increases in interest rates.
But they were low for this quarter.
Included profits from the sale of two interest rate swaps.
We expect these costs to increase going forward.
This quarter. We also had a considerable increase in equity income Investees, which is our share in the profits of our JV structures.
Came in at $8 8 million for the quarter.
As a result of the profits from the sale of the.
Joint venture vessel.
As a result, we ended the first quarter of 2023 with a net income of 16.8 million compared to seven 6 million for the same quarter of last year.
This was a record quarterly net income figure for us.
Looking at our balance sheet.
Our liquidity.
Clothing restricted cash short term investments that these time deposits.
We ended the quarter at 92 6 million.
Close to where we were at the end of last year.
Having paid down.
2 million in debt during that quarter.
Yeah.
Liquidity came from vessels and.
From improved operating cash flow.
Advances of $23 4 million relate to the payments made on the medium gas carrier under construction.
Vessels net book value decreased from 628 million to 619 million.
The regular depreciation can be sailing vessels.
The total value.
Investments.
Increased to $55.
$5 million.
We did not in basketball.
J D.
What they're doing the appropriate joint ventures.
The overall outstanding debt.
845, compared to 277 million the previous quarter.
And the result.
So.
That's totally coffee.
It increased shareholders' equity was $532 million.
Concluding our financial commentary with slide nine.
Briefly reiterate the debt profile and capital structure.
Following their finance can be done over the last couple of years, we have extended the maturity of the loans.
2025 and beyond.
Recently, the focus has been towards paying down debt.
During the first quarter of 'twenty three.
$2 million of debt.
Regular amortization.
We paid releasing five vessels.
During the current quarter and $36 million has already been paid.
Looking full repayment of the debt.
More vessels.
We expect by the end of the quarter to repay another $30 million.
Related to the vessels.
Agreed to be sold.
We expect to continue to reduce debt.
And through regular repayments as well as prepayments advocates may be in order to reduce our expenses.
Overall.
No.
302 million a year ago to below 250 million at the end.
Nice quarter.
About 32% of the current debt hedged with interest rate swaps at an average of 2%.
The gateway bookings per se right.
During the quarter we had.
To close our capital positions.
That's a good thing.
Without skincare profit that further reduce interest expense.
Expenses for that quarter.
Overall, we continue to maintain very low leverage and increase the number of unencumbered vessels from six to 10.
We have also signed a new loan agreement.
One of our existing finance years.
The financing of the building.
Building patches.
We expect to receive up to $17 million in finance proceeds.
Investors.
Subject to customary closing.
I will now hand over to Mike.
All.
Yes.
Part of the company.
Okay.
Yeah.
On slide 10.
Okay.
Your market does it product.
The increase in content, we're investing so far.
Okay.
And of course that during the first three months.
The Covid LPG.
Exports increased 6% slightly better than what was expected.
Exports of LPG.
Please go ahead.
Middle East countries continued to show significant double digit increases in exports with U S firms planning cutbacks get discharged.
Exports for the future.
We expect European imports will start stalling.
<unk> actually got some or something.
However, the field three moving things from my inputs across the country.
To be shut down.
LPG is not sanctioned.
Thanks Robby.
Oh, I'm, sorry in Europe , the largest importers of Arctic cats.
India, China, and Japan, having freeze that unfortunate.
Okay.
From an LPG contract price despite price.
Yeah.
Fortunately for you Paul.
British talk as far as China.
Yeah.
Post COVID-19.
Sure.
Four points of increase.
Presenting person GDP in the first quarter.
And the significant increase in imports.
P G or proportionately for the short term outlook is the fact that margins for PVH Bloodshot finally turned positive and we've seen reported an increase in utilization rates for the production of polypropylene.
We have mentioned before that the main catalyst for Chinese LPG demand will increase capacity would suggest perhaps that was imported propane as a feedstock.
These plans have been blocked.
The delays in local tax rates.
The favorable margin.
Rapid expansion of data capacity in China.
Over the last few years it started.
On slide 11, we're presenting some of those gains.
Our sugar market commensurate with the market rates for our market.
I think you want to integrate time charter age from looking at the table with the published rates are there ones here over here basically there continues to be healthy growth and 4% at 15% depending on the size of the vacation.
Other smaller countries west of Suez as spot market has remained tight.
Last call.
Others have been left with few choices for vessels cargos, and consequently orders have been able to keep that a strong levels. While also keeping idle time at the minimum.
I'm sure as the spot market in Asia has been a bit more active lately on both pet chems that LPG is that there continues to be a high degree of confidence amongst the choppers.
The market has been relatively quiet.
Covered amongst charters moved already high rates I imagine upward slightly but picked up with synergies being fixed west of Suez is increasing for the handy size vessels or spot market for something had to be typed with very limited patent Chicago available for spot spot cargos charters, how about you have allocation of themselves with Patel.
Cargoes to it but no vessels to lift up.
On the payer side, we have seen a bit.
Activity level.
It's been the charters have been extended out a couple of near once concluded the market remains tight.
Even though we've seen some of the short term charters.
Charter is coming to an end and the vessels switching back to Enbridge, Inc. The fundamentals of our core fleet of small construction are starting to look promising.
A third of our fleet.
20 years of age.
Markets remain strong.
Conducting the continuous to remain subdued even the older vessels recently sold were destined for further trading what we should expect a tighter regulation of the future will put some of these vessels to get scrapped.
The ordering activity continues to be subdued with only a handful of additional vessels being older aspiration published orders. There are about 21 ships in order to be delivered in the next couple of years, including a couple that are set for spring 'twenty three deliveries, but it had gone under the radar.
Such an order book in itself is not posing a risk of upsetting the balance over the market.
Continue to believe that the risk of seeing bulk ordering of new vessels that get the supply demand balance is improbable.
2% annual increase in the fleet before scrapping is one of the smallest if not the smallest in all shipping segments.
On slide 12, we are showing the evolution of our LPG fleet and the slides for comparison purposes, we have excluded the tanker vessels.
We held off until 2021.
We are focusing on the pure LPG fleets in terms of cubic capacity, including the JV vessels, we have always been active in the sale and purchase market buying and selling the ships will be asset values rising as a result of a strong market. We find at an opportune time to sell some chips after selling four of them in 2022 and four more this year.
One of the vessels built by our JV, we entered into an agreement to sell another four vessels for about $70 million in aggregate, we wouldn't record profits from these sales, but we're looking at are still more vessels, even the prices right.
Such strengths have reduced the average age of our fleet to nine years, which is quite more than <unk>, our JV with lots of opportunistically sell vessels and occasionally by for example, the one.
We're building maybe on the gas Guy that are JV ing with the demand is not expected to deliver in September this year.
You're not a conflict we would expect that with the addition of the 40000 cubic meter in your buildings starting in late 'twenty two 'twenty three we once again increased the capacity.
In terms of cubic meter cubic meters wide being able to better serve the diverse needs of our customers with strips of all sizes.
It's a strategic decision to diversify the fleet in and split between smaller vessels that we have traditionally operated and larger vessels. How do you send me a medium gas carriers that have slowly been entering our fleet since 2018.
In slide 13, we are outlining some of the key variables that may affect our performance in the quarters ahead. Obviously the most important development is that we have mentioned earlier that the reopening of China. After a long awaited two years with the Chinese economy back on track, we already see increased LPG trading on the other hand, we are entering the summer months.
We're normally demand for LPG is less strong stomach.
Summing up we are reaping the fruits over the favorable market conditions, and our son sound business strategy and execution.
They're having reported in the previous quarter record profits, it's with great pleasure that we announced it.
This time the record quarterly profits the loved Applaudable bottom line results were driven by two factors. The strong performance of revenue generation from our existing fleet and the returns realized from the investments in our JV is following the sale.
One vessel the profitable sale of four vessels will be announced today will further boost our futures.
We have taken the opportunity to divest assets in a rising market and will continue to diversify the fleet.
The timely addition of bigger ships at the same time.
Efforts to contain our cost base and would make use of our liquidity to de leverage in a rising interest rate environment and return value back to our shareholders in five years.
$50 million share buyback, we're expecting especially shall be besides our companys future. While at the same time, we remain positive for the medium term outlook for the LPG market.
Now that disappeared worth of units that we can provide to our shareholders can be substantial we're taking advantage of the strong market is going to have continuing strengthening our balance sheet, which we believe.
Are you able to sleep continuous operations of our company.
Lastly, we remain committed to our disciplined and balanced strategy that should continue to allow us to generate shareholder value throughout the market cycles.
So you kind of representation and we should open the floor for questions.
Thank you as a reminder to ask a question you would need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again.
We will take our first question.
Another question comes from the line of Tate Sullivan from Maxim Group. Please go ahead. Your line is open.
Thank you. Thank you Henri to start so you ended the quarter.
First quarter with 32 ships, but the sale of the additional shipping will be has already been completed this quarter and selling or other ships, bringing your fleet down to 27, and then adding two new builds so it's a fully delivered size of the fleet 29 today with five JV as vessels. Please.
Sure.
Yeah.
Sorry, what was the question.
What is the fully delivered size of the fleet Harry just to confirm is that 29. After after you finalize all the sales that you announced today.
Yeah.
29 ships.
It's a very fluid environment, therefore buying or selling ships on a monthly basis paid but I think our numbers right.
Okay.
And then announcing the $70 million sale.
Does it support the previously disclosed net asset value that you disclosed was it a month ago or so longer at 14 50 and can you talk about the gains on that sale or are you not finalized.
I think I'll touch that makes them it would be higher than that.
What was presented.
Okay. So the higher value, Okay, and then how about the opportunity to.
To buy larger ships in this rising rate environment.
I mean could you would you consider new builds is it still extended delivery timelines for new builds or are there opportunities to buy larger ships can you comment on that market.
All right.
We've started out very expensive that's why we're selling shirts.
New building slots.
If you find that they're going to be very forward.
So not a big not the biggest funds such shareholders.
I'm sure, it's going to be difficult.
Okay, and then you mentioned paying down sort of sales sales with four ships, bringing in and reducing the debt that you've mentioned earlier in the marks too.
Did you did you say that your initial pace of the repurchase activity might be a bit slow compared to paying down debt.
How long is the repurchase authorization. Please two questions.
Sorry, I didn't get the last part of your question.
Well, let's start with how long is the repurchase authorization for the $15 million.
They haven't given us the timeline.
Okay, and then can that start immediately as well or is there when can stop guests start repurchasing shares.
Yes, yes.
Now to start whenever the Milan show, yes. The idea is just to start.
Alright.
But did you did you mentioned earlier, maybe in the near term more of a focus on paying down debt.
No we didn't say that we said we wanted to do both things concurrently.
Because.
We're not generating hundreds of millions we have to prioritize the.
Debt repayments over share repurchases, which means are we going to do both but maybe not in a gradual way.
Okay, Great I'll hop back in the queue. Thank you.
Thank you.
Thank you we will take our next question.
And your next question comes from the line of Kim on Timberlands for value Investor's edge. Please go ahead. Your line is open.
Yeah.
Good morning, Thanks for taking my questions.
I wanted to follow up about recent asset sales.
You had previously tried to sell some of the oldest vessels on the fleet.
And I was wondering what's the reasoning behind the decision to sell some of them more modern assets.
Is it just taking advantage of a strong pricing environment or is there something else.
Yeah very good question.
Yes values for these ships now are quite high so it's a good time to sell.
Do we want to actually we have said many many many quarters again and again, we want to have a bigger balance.
Better balance between smaller ships and larger shops, so we need to sell smaller ships and when the time is right bye bye bigger ships. So that's why we've done it.
That's helpful. Thank you and looking ahead, we're going to enter the seasonally weaker period of the year.
Could you provide some guidance on where the U S.
The proceeds going for Q2, and whether you have any visibility for Q3.
No, we don't give guidance, but the us recover Eddie said, 80% of the 'twenty three there is already fixed shall.
So we don't expect huge changes in our numbers.
Alright, thanks for the color that's all from me.
Congratulations.
Thank you.
Thank you once again, if you wish to ask a question. Please press star one and one on your telephone.
We will take our next question.
Your next question comes from the line of Tate Sullivan from Maxim Group. Please go ahead. Your line is open.
Oh, Thank you for taking my follow up and then in terms of the joint venture income in first quarter $8 8 million I think before you had mentioned how much of that was the gain on the sale versus the JV income line. If you can.
<unk> disclosed.
Okay.
Okay.
7 million towards the the gains out of eight and a half.
Okay.
Okay, Great and then did I hear you mentioned earlier that operating expenses will decline quarter over quarter and <unk> 23.
<unk>.
But the average operating expenses per ship pretty saying I mean, the total level.
On the selling of the ships.
Oh.
That's what we are trying to floor, but.
The inflation is a big enemy.
Okay.
Okay, Great alright, thank you very much.
Good day.
Thank you.
That seems to be no further questions at this time please continue.
We'd like to thank all of you for joining us at our conference call today and for your interest and trust in our company and we look forward to having you with us again.
Our Q2 results in August thank you.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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